What To Watch For In L Brands’ Q4 Results
L Brands (NYSE: LB), is scheduled to announce its fourth quarter 2018 earnings on February 27. During the Q3 earning results the net sales of the company rose to $2.77 billion, compared with $2.61 billion a year ago, up 6% from the prior-year quarter, with adjusted earnings per share at $0.30. This was driven by growth across its Bath and Body Works segment, a well-positioned customer strategy, international diversification, and rising online sales. The BBW segment continues to perform well, but the results have been disappointing for Victoria’s Secret. On the other hand, VS Stores still continue to be the most important segment for the company, as it derives close to 50% of its revenues from this segment, and it is striving to get it back on track.
With the growth in its Q3 results, the company forecasts its sales to grow by single-digits and adjusted earnings in the band of to $2.45 to $2.70 per share, including earnings per share between the band of $1.90 and $2.10 in the fourth quarter. Recent growth initiatives taken by L Brands viz: revamping the business by improving the store experience, localizing assortments, and enhancing direct business, will help it to generate incremental sales and increase store transactions through higher conversion rates in Q4 and beyond. Additionally, the company’s foray into international markets is likely to provide long-term growth opportunities and generate increased sales volumes.
Please refer to our interactive dashboard: Our Expectations For L Brands’ Q4 2018. In addition, here is more Trefis Consumer Discretionary data.
Below are key factors that will likely drive L Brands’ fourth quarter earnings results.
Bath & Body Works segment will continue to perform well – Strong performances by the company’s home fragrance assortment drove this segment’s sales and hence Bath and Body Works’ total sales improved 17.2% to $956.2 million, with a 10% rise in comparable sales in Q3. This segment is likely to boost growth in the upcoming earnings as well.
Revival in Victoria’s Secret Performance – The decline in traffic in brick-and-mortar stores has been a major cause of concern for VS, causing its Stores sales to decline by 5.2% to $1,177.8 million, Victoria’s Secret direct sales increased 18.6% to $351 million. Total Victoria’s Secret sales rose 0.7% to $1,528.8 million, while comparable sales declined 2%. To revive the performance the company has since made attempts to improve their understanding of customers’ demands in order to make the products more relevant and relatable to them. VS is working on providing the most innovative and fashionable bras, in all its segments, which should positively impact its Q4 results.
Steady focus on delivering a differentiated customer experience will aid strong returns – L Brands continues to revamp business by improving the store experience, localizing assortments, and enhancing direct business. These measures will facilitate it to generate incremental sales and increase store transactions through higher conversion rates. A sustained focus on cost containment, inventory management, merchandise, and speed-to-market initiatives has kept L Brands afloat in a competitive environment.
Increasing footprint in the International Markets – With their sights set on the global marketplace, the international business will boost the company’s top line and could become a source for long-term growth and increased sales volumes. L Brands’ store operations around the world are a mix of company-owned and franchised locations both upholding the highest brand standards with no visible difference to the customer.
Looking ahead, we believe that driven by the above trends the company is focused on improving performance in the Victoria’s Secret business, staying close to its customer, improving the customer experience in stores and online, and improving assortments in compelling new product launches with a steadier footing in 2019.
What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
Like our charts? Explore example interactive dashboards and create your own.